There are many things to carefully consider in a divorce, and one of those things is how to divide assets. For people who are nearing retirement age, dividing up the retirement accounts is a big piece. The rise of “gray divorce” has required baby boomers to think more about this issue, and to determine what is fair and just when it comes to these accounts. Pensions and retirement accounts are often fought over during a divorce, which can turn an otherwise relatively neutral process into one that’s very contentious. Understanding the challenges related to a gray divorce can make the process run smoother.
Understand the Laws Related to Retirement Accounts
In most cases, there is a 50-50 split of retirement accounts when a couple divorces. This is true even if one person has paid in most or all of the money into that account, as the account is considered marital property. Because of this, someone who thought they had enough for retirement may suddenly find that they only have half of what they were expecting, and that it is not enough to sustain the lifestyle they had planned. This could come to a shock to baby boomers who have been putting away money for years.
Don’t Choose Real Estate Over Retirement Accounts
Many women choose to keep the family home instead of taking a portion of the retirement accounts during a divorce, but that isn’t necessarily the best strategy. Homes cost a lot to maintain and if it’s a large house quite a few rooms may go unused. Additionally, depending on the real estate market, homes can lose their value. Houses aren’t retirement-based assets, and in a few more years when retirement comes around it may be difficult to keep up with the home’s bills without a higher level of assets.
Make Sure You Get Good Legal Advice
If you’re divorcing in your 50s or beyond, good legal advice is vital. You want to make the right financial decisions and understand what you may have to give to your spouse as a part of the divorce. With retirement accounts generally considered marital property, you could have a lot less money to retire on than you expected if you divorce later in life. That doesn’t mean you should stay in your marriage, but that you should have a lawyer on your side who has a thorough understanding of the challenges facing those seeking to divorce later in life.